AYESHA RASCOE, HOST:
Iran has one of the largest proven oil reserves in the world. Estimates show it's third globally behind Venezuela and Saudi Arabia. It also controls the Strait of Hormuz, where 20% of the world's oil passes through. So along with strikes, how can Iran use this as a weapon in retaliation against the U.S. attacks? We're now joined by Esfandyar Batmanghelidj. He's CEO of the Bourse & Bazaar Foundation, a London-based think tank focused on Iran's economy. Good morning.
ESFANDYAR BATMANGHELIDJ: Good morning. Great to be with you.
RASCOE: So a couple of weeks ago, Iran briefly closed the Strait of Hormuz for some live fire drills. What are you watching for there in the coming days?
BATMANGHELIDJ: Well, this morning, there was an analysis by a data firm called Kpler that pointed out that maritime traffic in the Gulf is down about 70%. And so even without physically closing the strait, the perception of risk in the Persian Gulf by the owners of commercial vessels and by global insurance companies has been enough to really throttle the trade that's moving through that body of water. And this is having a significant impact on the economies in the Gulf, which is not only a problem for Iran but also its neighbors like the UAE and Qatar.
RASCOE: Well, talk to me about that. Like, how big of an impact is that having on the neighbors? But then also, when people are thinking about, you know, several major oil companies and tank owners have suspended shipments of crude oil, liquefied natural gas and fuel through the Strait, people are going to be very concerned about the oil markets, as well.
BATMANGHELIDJ: In the U.S., whenever there's disruptions in the Persian Gulf, we are concerned about the price of oil because that's what's going to be felt at the pump. But really, when it comes to the economic impacts for the region, what we're talking about is a set of economies that are really dependent on access to the international economy through global shipping, global aviation and a dependence on supply chains.
And in each of those areas because of the decision of the Islamic republic to respond to the U.S. attacks asymmetrically - meaning that they couldn't really respond militarily to the U.S. in a way that imposed significant costs, they don't have the military capabilities - they've instead externalized the war or expanded the war to target basically neighbors that were friendly neighbors to Iran. And in doing so, are trying to impose pain on those countries so that the leaders of the UAE, Saudi Arabia, Qatar, Oman, turn to Trump and say, look, we need to bring this war to an end because the costs are too great. And...
RASCOE: Well, how much pain are - will those economies feel or could they feel if this goes on for another week or two?
BATMANGHELIDJ: I think it's significant. Of course, the disruptions to oil exports have an impact on the economies in the country - in - of these countries because they're very dependent on oil revenues for their economies and for their government budgets. But the thing that is almost more important is that these are countries that are also very dependent on imports on through shipping for essential commodities, including food. And so if we look at a country like the UAE, it is possible that within the span of about a week, if these disruptions remain at this level, there will start to be certain categories of food, like fruits and vegetables, where there are shortages. Now, this doesn't mean that it, you know, will lead to an absolute crisis for the Iranian economy. But at the same time, if you imagine that Dubai, for example, is a city where people travel for business and tourism...
RASCOE: Yeah.
BATMANGHELIDJ: It's a major international capital. The lack of basic foodstuffs is a major hit to those countries.
RASCOE: Well, how are - how sustainable are these measures for Iran? - because there's a cost to Iran to do - take these actions as well, right?
BATMANGHELIDJ: Absolutely. But Iran is using relatively rudimentary military tactics in order to cause this pain. And a lesson could be maybe drawn from the Red Sea crisis, where just these disruptions can be enough to really limit the ability of these economies to function normally. But it's a political gamble because it can also turn these countries against Iran at a very critical moment.
RASCOE: That's Esfandyar Batmanghelidj, CEO of the Bourse & Bazaar Foundation. Thank you so much for speaking with us today.
BATMANGHELIDJ: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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